Friday, January 30, 2009

Things From Which He Failed to Protect Us

This story got lost in the stimulus-bill shuffle Wednesday, but it deserves a lot more attention than it got:

The FBI was aware for years of "pervasive and growing" fraud in the mortgage industry that eventually contributed to America's financial meltdown, but did not take definitive action to stop it.
"It is clear that we had good intelligence on the mortgage-fraud schemes, the corrupt attorneys, the corrupt appraisers, the insider schemes," said a recently retired, high FBI official. Another retired top FBI official confirmed that such intelligence went back to 2002.

The problem, according to the two FBI retirees and several other current and former bureau colleagues, is that the bureau was stretched so thin that no one noticed when those lenders began packaging bad mortgages into bad securities....

The FBI not only lacked the resources, but also never got the tips it needed from the banking regulatory agencies. The Securities and Exchange Commission, the Office of Thrift Supervision and the Office of the Comptroller of the Currency also failed to detect the securities issue, said the first retired FBI official....

Both retired FBI officials asserted that the Bush administration was thoroughly briefed on the mortgage fraud crisis and its potential to cascade out of control with devastating financial consequences, but made the decision not to give back to the FBI the agents it needed to address the problem. After the terrorist attacks of 2001, about 2,400 agents were reassigned to counterterrorism duties.
How much did this cost us? A couple hundred billion? A trillion? More?

Note, also, the confluence of shiny-object distraction (marshalling the vast law-enforcement resources of the Federal government to make sure nobody attacks the Brooklyn Bridge with a jackhammer) with anti-regulatory ideology (well, of course the regulators weren't doing their jobs--that was their job) that makes this such a quintessential Bush story. It's great that we finally have a President who can walk and chew gum, and who thinks regulation means regulation...but we needed a President like that 8 years ago.